Asia stocks off lows as European concerns ease

VirginiaHarrison

NickGodt

MUMBAI (MarketWatch) — Asian stocks ended off lows on Wednesday, while Hong Kong rose, after German Chancellor Angela Merkel reportedly sought to ease fears over an imminent default for Greece.

Fears of contagion and of another hit to European growth had first pressured Asian markets after ratings agency Moody’s downgraded two French banks.

Japan’s Nikkei Stock Average (NIK) lost 1.1%, and Australia’s S&P/ASX 200 index (XJO) lost 1.6%. South Korea’s Kospi (0100) dropped 3.5% as investors took their first chance to react to recent events following a long holiday weekend.

Europe’s debt woes are dominating markets as the threat of Greek default looms and Peter Esho chief market analyst at City Index in Sydney, said “there’s a lot of fear in the market and concerns about counterparty risk.”

“There are concerns about Asian growth sentiment and corporate sentiment as well,” he added.

Japan’s economic recovery is likely to be frustrated by Europe’s debt woes and a slowing U.S. economy, a board member of the nation’s central bank cautioned on Wednesday.

Stocks rise; tech, industrials lead

(3:06)

Stocks notched a second day of gains, led by the industrial and technology sectors, as investors kept an eye on the latest developments in Europe.

“China is continuing to come out and talk up their growth prospects and their capacity to intervene in markets, but there is a layer of politics on top of that,“ City Index‘s Esho said.

Key on Wednesday in Europe’s unfolding debt saga is a conference call among German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou. Later in the week, U.S. Treasury Secretary Timothy Geithner will meet with European Union finance ministers. Read more on Geithner’s EU visit.

Financials slump

Losses for financial stocks, viewed as particularly exposed to events in Europe, accelerated in afternoon trading.

Credit Agricole’s bank financial strength rating was also cut in a move Moody’s said means its rating is “more consistent with the bank’s sizeable exposures to the Greek economy.” Read more on downgrade.

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